Yes we’ve got a space agency – but our industry needs ‘Space Prize Australia’

A launch like this could happen from Australian soil – with the right investment.
from www.shutterstock.com

Duncan Blake, University of Adelaide

The Australian Space Agency commenced operations on July 1 2018 with the ambition of tripling the Australian space economy by 2030.

But with the Australian government investment of A$41 million, we should not expect anything like NASA (which has a budget more than 2,000 times greater).

On the contrary, the impetus for growth must come from the Australian space industry itself – and that’s why “Space Prize Australia” can work.

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The space industry in Australia is currently characterised by many small, independent and disparate enterprises in niche areas. Surviving in an increasingly competitive global market will require collaboration, pooled experience, and teamwork. In addition to the space agency, we need something to galvanise Australian enterprises in the space industry.

But turning new technology into marketable commodities is a risky enterprise. Along that journey, a prize provides the opportunity to gain financial rewards for demonstrated achievement of milestones. It provides context to draw the attention of potential clients to the prospective commodities of Australian space start-ups.

In the model of previously successful prizes in aeronautics and space, Space Prize Australia could drive an Australian space launch – where the satellite, components, launch vehicle, launch facility, operation, ground control station and user applications all come from Australia.

The Great Air Race

On 19 March 1919 the government of Prime Minister Billy Hughes announced a £10,000 prize for the first successful flight from the UK to Australia in an aircraft manned by Australians, for the purpose of “stimulating aerial activity”.

It was known as the Great Air Race, and within five months of the announcement, six groups of former WWI airmen and their aircraft had formally registered to compete in the race.

Four Australians – Captain Ross Smith, Lieutenant Keith Smith, Sergeant Wally Shiers, and Sergeant James Bennett – won the prize:

Smith and his team landed at Fannie Bay Airfield in Darwin at 4.12 p.m. on December 10, 1919 and were instantly mobbed by almost the entire population of just under 1,500. Lieutenant Hudson Fysh, soon to be co-founder of the newly formed Qantas, was the first to greet the four airmen.

Their trip was a bold demonstration of what Australians could do. It connected us to the global economy and community, put Australia at the forefront of global aviation, and provided inspiration and energy for the Australian aviation industry.

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Other space prizes

The Great Air Race and others like it were the inspiration for more recent prizes, specifically in the space industry.

The Ansari X Prize was initiated in 1996 at a value of US$10 million. It was designed to reward the first non-government organisation to launch a reusable manned rocket into space twice within two weeks. The prize was won in 2004 by the Scaled Composites company led by Burt Rutan.

The Ansari X Prize resulted in the first non-government launch of a reusable rocket into space twice in two weeks.

Of greater significance is that it was estimated to have generated US$100 million in new technologies investments. The winning technology was licensed to the newly created Virgin Galactic, and Scaled Composites was later sold to aerospace and defence firm Northrop Grumman.

With an initial target date of March 31 2018, the Google Lunar X Prize included rewards totalling US$30 million for the first privately funded team to place a spacecraft on the Moon, travel 500 metres and transmit high definition video and images back to Earth.

Interim prizes were awarded, but no team was able to meet the challenge by the deadline. Nevertheless, it is estimated that it generated over US$300 million in investments.

Let’s get started

Space Prize Australia is, at this stage, a proposal: no one has committed the funds. However, it has the capacity not just to galvanise our space industry enterprises, but also to inspire the Australian population broadly – just as the Great Air Race did.

It could start with crowd-funding – so that everyday Australians can have a stake in the Australian space industry – and with philanthropy from wealthier individuals or groups.

State governments may be interested. The states and territories have already demonstrated interest in and commitment to attracting space industry to their cities, and are seeking further opportunities to do so.

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Federal government agencies could chip in too. As well as the Australian Space Agency, Defence, Geoscience Australia, CSIRO and Bureau of Meteorology would benefit from the development of an Australian capability to launch Australian satellites on Australian rockets from Australian sites and operate them from Australian facilities.

It is impossible to say how much could be raised as a prize pool from all those sources. But if it could be announced on 19 March 2019 – the 100th anniversary of the announcement of the Great Air Race – then AU$10m would seem apt. It’s a figure of comparable significance to the £10,000 prize offered in 1919, and would be sufficient to attract several competitive teams.

The world was captivated by the launch of Elon Musk’s Falcon Heavy rocket in February 2018.
blakespot/flickr, CC BY

Inspiration matters

Space Prize Australia would provide an opportunity for Australian space enterprises to demonstrate their technology, with financial and other support.

The prize would be a means to encourage and facilitate collaboration – potentially with benefits even for enterprises that don’t win.

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The prize could be used, in part, to send the winners on a global tour, to meet with major clients, attend several major events and promote what Australia can do.

It would attract global attention and inspiration and it would showcase Australian space capability to the world.

Perhaps most importantly, it could inspire every Australian girl, boy, man and woman who looks up at the sky at night and wonders what she or he can achieve.

Duncan Blake, PhD candidate, law and military uses of outer space, University of Adelaide

This article was originally published on The Conversation. Read the original article.

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Shorten announces company tax compromise but business still critical

Bill Shorten’s tax cuts compromise follows a fierce backlash from business and an outcry from some senior colleagues.
AAP/Joel Carrett

Michelle Grattan, University of Canberra

Opposition leader Bill Shorten has backed down on his controversial declaration on Labor’s company tax policy, announcing a compromise that would allow firms with turnovers under $50 million to keep the tax cut that will be in place at the election.

This would be a 27.5% rate. But companies would not get the rest of the already legislated cut, which eventually takes their tax down to 25% by 2026-27.

The compromise follows a fierce backlash from business and an outcry from some of Shorten’s senior colleagues, after he declared an ALP government would repeal tax cuts for firms with turnovers between $10 million and $50 million.

While that position had support in the opposition’s expenditure review committee, it had not been taken to shadow cabinet.

The shadow cabinet endorsed the new position on Friday morning.

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Shorten told a news conference that it had become clear in consultations with business and colleagues “that any proposition to change already implemented tax rates … was creating great uncertainty.”

“I have listened to all of the debate, spoken to colleagues, spoken to business. I now accept that simply stopping at $10 million would have created more confusion and uncertainty and it was not the main game,” he said.

Asked whether he had got things wrong, Shorten said: “You can play all the word games you want, but let me be very, very clear. We have changed our position, we have amended our position because politicians who do not listen, politicians who just simply want to stick on one course of action regardless of all the facts, I do not think that helps anyone.”

Shorten said that as well, on the latest figures from the Parliamentary Budget Office (PBO), “we have also found that the cost of this amendment on company tax cuts is not as great as we thought.”

Shadow treasurer Chris Bowen told the news conference that the position Shorten put on Tuesday reflected what Labor’s expenditure review committee thought at that time could be afforded – before the updated PBO figures.

Compared with the government’s legislated cuts, the Labor position saves $2 billion over the forward estimates and $62 billion over a decade.

An ALP government would have to get its repeal legislation through the Senate, which could be a challenge.

Business remained dissatisfied with Labor.

Business Council chief executive Jennifer Westacott said the decision “has created confusion and will hurt business confidence”.

Labor had “failed to properly listen to the business community’s call to reverse its announcement earlier this week to repeal the tax cuts for business with a turnover of under $50 million. Freezing the threshold at 27.5% for those businesses is actually a tax increase on the 25% rate that has been passed by the parliament”.

The Australian Industry Group welcomed the Labor change but said it regretted Labor remained uncommitted to taking the rate to 25%.

The group’s chief executive Innes Willox said: “We look forward to further discussions with the opposition on tax policy with the aim of a bipartisan commitment to lowering Australia’s corporate tax rate for all businesses to a more internationally competitive rate of 25 per cent over the medium term.”

Finance Minister Mathias Cormann tweeted: “Bill Shorten can’t even perform a backflip properly. Turns out he is still pushing for higher taxes on small and medium sized business putting jobs right across Australia at risk.”

Treasurer Scott Morrison said Shorten “has shown a complete lack of sensitivity to what our economy requires to ensure that people have their jobs and their wages and can plan for their future with confidence.”

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Report recommends big ideas for regional Australia – beyond decentralisation

The committee has laid out a far-reaching and highly practical work program for regional development.
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Amanda Walsh, Australian Catholic University

After a full year spent delving into the economic and social challenges facing regional Australia, the Select Committee on Regional Development and Decentralisation this week delivered its report.

It’s a surprising piece of work. Why? Because it avoids the ingrained partisanship that has bedevilled regional policy in Australia.

Put simply, it’s good, rigorous work. It makes recommendations that any smart government, of any political hue, could support.

The report even avoids the landmines surrounding the highly contentious policy of decentralisation – the relocation of city-based public service agencies to the regions. It has sidestepped its most obvious route – a squabble over decentralisation – and instead taken a good, hard look at the big issues confronting regional communities and economies.

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Let’s take a moment to recall the politically awkward background to this inquiry. It was launched following Barnaby Joyce’s controversial decision to uproot the Australian Pesticides and Veterinary Medicines Authority from Canberra and relocate it to Armidale, in his own electorate.

A separate Senate committee had already inquired into that decision. Its report (issued a year ago) demonstrated the highly politicised nature of this policy terrain: the majority report, by non-government senators on the committee, firmly rejected the relocation, while the minority report by government senators slammed the entire inquiry as “a political witch-hunt”.

This new inquiry could have traversed the same terrain, with the same outcomes. Certainly, the terms of reference were heavily focused on the issue of decentralisation. But they also invited comment on the overarching wellbeing of regional Australia, and this provided an opportunity the committee members seized.

The committee’s report covers a sweeping range of issues, which is entirely necessary, given the complex interactions between regions and what the committee terms “megatrends” – things like globalisation, population ageing, urbanisation and technological change.

The committee’s recommendations are similarly comprehensive and unapologetically ambitious. The explicit goal is to move beyond the old “roads and rail” approach to regional investment. Instead, it supports strategic (or “catalytic”) investments that build workforce and leadership capacity, cultural capital and infrastructure to support and attract jobs.

The report even elucidates 12 principles of regional development. It’s a sure sign that the committee made a genuine effort to synthesise information from the 196 submissions it received and the more than 100 witnesses at public hearings around the country.

The 13 recommendations are arranged around a central strategy, with six interrelated themes:

• building “enabling infrastructure” that supports development

• identifying regional development priorities through a national process

• extending the fledgling City Deals program to regional cities

• giving Regional Development Australia committees more power and resources

• developing a proper policy for public sector decentralisation

• strengthening regional universities.

I’ll own up to being very pleased that my own recommendation made it onto the list: that the government prepare a white paper on regional Australia. This would elevate regional policy to the same hallowed arena as foreign, defence and security policy.

All of this would be monitored by a new Joint Standing Committee on Regional Development and Decentralisation, to cement parliamentary oversight of the work program.

And what about shifting all of those public sector jobs out of the capital cities and into the regions? This isn’t a new debate. In fact, decentralisation is a recurring theme in regional development, at both federal and state levels.

The practice of governments luring, or pushing, jobs from the corporate and public sectors into regional Australia stretches back to the 1930s. Since then, governments have periodically promised – and occasionally delivered – highly interventionist policies to move labour and capital from the cities to the country.

This inquiry was charged with examining decentralisation, and its report does exactly that, but in an admirably low-key way. Shedding more light than heat, the report insists that decentralisation should only be pursued where it makes sense – that it “should be part of a broader strategy for regional development”. That simple statement is a marked departure from the previous partisan bickering on this issue.

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So where does this report leave us? And, more importantly, what does it do for the nearly 9 million Australians who live in regional and rural areas?

The answer is, the committee has laid out a far-reaching and highly practical work program for regional development. If either side of politics took up its recommendations, regional communities might find themselves in a better position to construct sustainable, enjoyable futures.

In the short term, an election is due in the next 12 months and there’s a good chance this report’s recommendations will be cherry-picked for election policies.

But beyond the current electoral cycle, this report gives federal parliamentarians a comprehensive plan for meaningful work over the next decade or more. Here’s hoping they make the most of it.

Amanda Walsh, Associate Director, Government Relations, Australian Catholic University

This article was originally published on The Conversation. Read the original article.

Levying GST on all packages is complicated and risky for everyone involved

Amazon has restricted Australians’ access to goods from its American site because of the GST reforms.
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Kathryn James, Monash University

If like most Australians you have an online shopping habit, then as of this Sunday you will likely pay 10% more for any goods you have delivered from overseas suppliers.

The reforms rely on local and overseas businesses and platforms (such as eBay and Alibaba) that make more than A$75,000 worth of annual sales in Australia to collect Goods and Service Tax on sales of imported goods worth A$1,000 or less, and then pass on that revenue to Australian authorities. Australia is the first country to require offshore suppliers to collect GST.

Once a platform reaches the A$75,000 threshold, any business making sales to Australian consumers through that platform will need to charge GST regardless of its size.

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However, the complexity of the reforms might jeopardise the necessary cooperation of overseas businesses, and place consumers at risk of paying wrongly charged GST. It could also leave governments locked in to an ineffective way of collecting GST on imported goods.

The government’s own estimates suggest that, after taking into account exclusions and non-compliance, the reforms will capture only half of all eligible sales. This will generate modest revenues of A$300 million over the first three years.

Why the reforms?

There are several good reasons to extend GST to goods bought by Australian consumers from overseas suppliers.

Much has been made of the need to “level the playing field” between domestic retailers (who collect GST on all eligible sales) and overseas retailers (where GST is charged only on sales over A$1,000).

At a more basic level, as a tax on household consumption, the GST should tax the purchases of final consumers. Therefore all imports should be taxed under a GST, as this is where the goods will most likely be consumed.

The choice to not tax imports of low-value goods was made for a practical reason – the cost of customs authorities collecting the GST at the border could outweigh the revenue obtained. Estimates suggest the exclusion cost about A$390 million, or less than 1% of total GST revenues of A$62.2 billion for 2017-2018.

But this has changed with the expansion of online shopping and the development of collection methods other than at the border. These reforms are therefore best understood as a revenue-integrity measure.

What will be the effect of the changes?

As border authorities will continue to collect GST on imported goods worth more than A$1,000, the reforms effectively establish two separate schemes for imported goods.

It is possible for one transaction to be taxed at the point of sale (GST is payable on sales that include low-value goods even if the total value of the sale is more than A$1,000) and again at the border (because GST will continue to be payable on imports where the value of the whole consignment exceeds A$1,000 even if it consists entirely of low-value goods).

So if a consumer buys three pairs of boots at A$400 (A$1,200 total) the transaction might be taxable either at the point of sale (as a sale that includes low-value goods) or at the border (because the total value of the consignment is over A$1,000).

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The reforms contain rules to address this double taxation. For example, it can be avoided by the supplier providing notice to customs prior to importation.

In the event this doesn’t happen, the consumer risks paying the GST twice because no provision is made for refunding GST paid at the border.

Consumers would need to rely on the goodwill of the supplier to refund the wrongly paid GST. The same risk applies if an overseas supplier wrongly charges GST at the point of sale on a GST-free good such as a medical aid or appliance.

All of this will require a lot of cooperation by suppliers with little reward for compliance and only patchy enforcement mechanisms for those that don’t comply.

The response of suppliers and platforms

Despite big players warning that the reforms might “force marketplaces like eBay to prevent Australian buyers from purchasing from foreign sellers”, Amazon has been the only one to act. It announced on May 31 2018 that it would no longer ship from its US website direct to Australian consumers as of July 1.

Consumers will instead be redirected to the Amazon.au site (with Amazon collecting the GST on imports) or would need to engage a redelivery service to ship items bought on Amazon.com to Australia (with the redeliverer responsible for collecting GST).

Although Amazon is right to question the “workability” of the reforms, there is little doubt that Amazon has the capacity to comply, as Treasurer Scott Morrison has suggested.

Amazon’s chosen method to comply with its GST obligations results in either reduced choice for consumers (64 million goods via Amazon.com.au compared to 480 million on Amazon.com) or increased cost (if shopping through Amazon.com).

It also transfers the compliance costs from Amazon to redeliverers (no doubt offset by increased customers) and makes the redelivery provisions in the reforms, intended as a last resort, far more significant.

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However, Amazon’s move is not simply about its capacity to comply with GST obligations in Australia. It must be understood in the context of governments around the world moving to collect GST and other taxes on online consumer spending.

Australia is the first jurisdiction to move to adopt a vendor-platform collection model and many jurisdictions are poised to follow suit (the European Union, Switzerland and New Zealand have all announced similar reforms). The Amazon response might give them pause for thought, and sufficient pause is all that might be needed.

Amazon would like transporters such as freight and logistics companies and Australia Post to collect GST on imported goods because it means suppliers and platforms like Amazon won’t have to do so.

The transporter method potentially offers a more reliable method to collect GST, but the paper-based international postal system is unable to do so at least until 2023.

Amazon appears willing to take a short-term hit while waiting for technology and regulatory change to make it viable to adopt its preferred method of transporter collection.

In the meantime, consumers should take care when making purchases from overseas suppliers to ensure as much as they can that GST is being correctly charged. And the world is watching.

Kathryn James, Senior lecturer, Law, Monash University

This article was originally published on The Conversation. Read the original article.

Government puts tax cuts for big companies on back burner – again

Michelle Grattan, University of Canberra

The government has pulled its legislation for tax cuts for big businesses – for the second time this year – after its last minute bid to get the Senate crossbench numbers failed.

Announcing the retreat, Finance Minister Mathias Cormann, who had been running the negotiations, reaffirmed that the government remained committed to the cuts, and cast the July 28 byelections as a referendum on them.

Cormann was unable to win Pauline Hanson’s two votes or the two senators from the Centre Alliance.

After flip-flops and with the byelection in Longman at the forefront of her mind, Hanson stuck with her rejection of the measure. The Centre Alliance’s opposition was reinforced by the fact that its lower house member, Rebekha Sharkie, is fighting for survival in the Mayo byelection.

The government had flagged that it intended to press the matter to a vote this week but then decided it did not want to be rebuffed on the floor or parliament.

Cormann told a news conference: “We
need more time to make our argument to our colleagues on the
Senate crossbench – and we, of course, will continue to make our argument in the Australian community.”

“The government remains fully committed to these business tax cuts for all businesses because it is the right thing to do for working
families around Australia.”

This is the second blow on the tax front for the business community this week.

On Tuesday, in what’s been labelled a “captain’s call”, Opposition Leader Bill Shorten announced a Labor government would repeal legislated tax cuts for businesses with turnovers between $2 million and $10 million. Business has reacted angrily to the repeal plan.

The ALP is still considering its position for those with turnovers from $2 million to $10 million. It is under pressure to clarify its policy quickly.

Cormann said the byelections “will
be a referendum on who has the better plan for a stronger economy and more jobs”.

In a reference to speculation about the Labor leadership in the event of bad byelection results, Cormann said, “After the byelections, who knows? We might
have a more business-friendly Labor leader. All sorts of things could
be different on the other side of the byelections.”

He said his message to the people of Longman and Braddon was that they “do have the opportunity to send Bill Shorten and Labor a message. If they don’t like Bill Shorten’s higher taxes on business, on hardworking Australians, on retirees, on home owners, on everyone who moves, then vote against Labor, put Labor last.”

Cormann also targeted One Nation voters. He pointed to polling showing two thirds of One Nation voters in Longman supported lower business tax.

“I hope that the fact that One Nation voters increasingly appear to be coming on board with our plan for lower business taxes will, over time, help to persuade Senator Hanson this is the right thing to do.”

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

What’s driving Chinese infrastructure investment overseas and how can we make the most of it?

Shahar Hameiri, The University of Queensland

Chinese infrastructure investment in Australia has rarely left the headlines lately. It’s reported that telecommunications giant Huawei will likely be banned from building Australia’s 5G network on national security grounds. Hong Kong-based company CK Infrastructure’s bid to buy APA Group’s gas pipeline network is also proving controversial.

Scrutiny of the national security implications of infrastructure has been upgraded. The new Critical Infrastructure Centre is assisting the Foreign Investment Review Board in this. Though not made explicit, the main focus is China.

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Greater scrutiny of investment projects is welcome, especially if community and environmental concerns are also considered. However, Australia could benefit from the availability of Chinese infrastructure financing.

Australia’s north has significant infrastructure needs. And in the major Australian cities, public transport systems are inadequate, leading to ever-longer commuting times. China also possesses world-class expertise in high-speed rail, which could be harnessed to better connect cities on the eastern seaboard.

Given the state of relations with China and Australia’s pressing infrastructure needs, the Australian government must develop a clear strategy for Chinese infrastructure investment. Instead of passively scrutinising bids, the government should proactively identify worthwhile projects and engage Chinese counterparts to finance and implement them.

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Belt and Road isn’t just a political ploy

A proactive approach could benefit Australia because Chinese infrastructure investment is not as strategically directed as many assume. This is clear if we examine the Belt and Road Initiative (BRI) – the centrepiece of China’s global infrastructure financing spree.

The Australian government, on security officials’ advice, has not joined the BRI. However, Belt and Road is not a carefully planned “grand strategy”. It is largely driven by the diverse activities of state-owned enterprises competing for projects and financing.

President Xi Jinping has undoubtedly used the BRI to signal China’s rise to “great power” status. But its main drivers are domestic and commercial. At its core, the BRI is an effort to alleviate China’s industrial overcapacity problem in key sectors, such as steel, glass, cement and aluminium.

Overcapacity has worsened since the global financial crisis, as Beijing sought to maintain growth by encouraging an infrastructure construction boom. State-owned enterprises (SOEs) spearheaded this. After profitable domestic opportunities had dried up, international expansion became attractive, to keep SOEs working and to find more productive outlets for China’s huge foreign currency reserves.

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The BRI’s implementation has reflected competition, lobbying and compromises among ministries, provinces and SOEs. Its masterplan document – “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road” – is a case in point. It contains 50 “priority areas”. These cover virtually every governmental and non-governmental activity, showing little actual prioritisation.

Early statements suggested a BRI focus on Central and Southeast Asia. But since 2015 the initiative has been formally opened to all countries. This was again due to intense lobbying from provinces, SOEs and some foreign governments. All are keen to get some of the action, suggesting little strategic direction.

The vague and loose Belt and Road plan has enabled considerable scope for interests within the Chinese party-state to use it for their own, economically motivated, agendas, with little consideration for Beijing’s wider diplomatic objectives. This has generated a rather chaotic, “bottom-up” process for selecting and funding projects.

Belt and Road project ideas usually emerge from state-owned enterprises’ in-country subsidiaries. After spotting an opportunity, they try to build support in the recipient government. Occasionally, this includes bribing officials. They also often seek to obtain the local Chinese embassy’s support to improve lobbying back home.

Once agreement with the recipient government is reached, the SOE or the recipient government applies for financing from China’s policy or commercial banks. The banks determine whether to extend credit after assessing repayment capacity. The central government’s involvement is typically limited to the National Development and Reform Commission’s formal approval.

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Australia still needs to manage the risks

Chinese infrastructure projects are not risk-free. The potential for misuse of key infrastructure to serve Chinese strategic agendas is clearly the Australian government’s foremost concern. But there are more immediate issues too.

Chinese banks’ lending standards are well below world “best practice”. They give limited consideration to social, environmental and labour protections when awarding financing to projects.

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Tough competition between Chinese companies means they have strong incentives to cut corners and promote projects that recipients do not need. The latter can be saddled with unnecessary infrastructure and potentially unsustainable debt. Furthermore, Chinese central agencies’ capacity to regulate SOEs’ offshore activities is weak, so they cannot be relied upon to manage these problems.

Closer scrutiny of investment proposals is, therefore, clearly necessary. So, too, is tight regulation of project implementation. Australian regulators should also ensure Chinese projects adequately resolve social, environmental and labour concerns.

The fragmented nature of Chinese investments provides opportunities, however, for selective engagement that could serve the wider public interest. This should form part of a clear Australian strategy towards China based on a nuanced analysis of both the threats and opportunities of this multifaceted relationship.

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Shahar Hameiri, Associate Professor of International Politics, The University of Queensland

This article was originally published on The Conversation. Read the original article.

Labor would quash tax cuts for businesses with $10-$50 million turnover

Michelle Grattan, University of Canberra

Bill Shorten has said a Labor government would repeal already-legislated tax cuts for companies with an annual turnover between A$10 million and $50 million, but left its position up in the air for those between $2 million-$10 million.

The decision, announced in response to questions at a news conference on Tuesday, does not appear to have gone through shadow cabinet. Nor did Shorten mention it when he addressed caucus on Tuesday morning.

It opened the opposition leader to immediate attack from the government and business.

Finance Minister Mathias Cormann said it was Shorten’s “captain’s call”.

Treasurer Scott Morrison said there were 20,000 businesses between $10-50 million turnover, with an average of 75 employees in those businesses.

“This is terrible news for 1.5 million Australians who work in those businesses that will have to face higher taxes under Labor if Labor is elected,” Morrison said. Shorten had turned former leader Mark Latham’s “ladder of opportunity” into “the snake of envy”, Morrison said.

The Australian Chamber of Commerce and Industry CEO, James Pearson said Labor had sent a “very bad signal to business today”.

The opposition has had a long-standing policy of leaving the cuts in place for the smallest businesses – with turnovers less than $2 million. But by failing to clarify its position for companies up to $10 million, Shorten has left uncertainty for many smallish businesses.

A spokesperson for Shorten said: “We’ve never supported these tax cuts for big businesses – we voted against them and we haven’t changed our position.

“We’ve always supported tax cuts for small businesses.

“As Bill said, we’re considering a threshold of $2 million or $10 million turnover. That will be decided by the shadow cabinet, in the normal way.”

Shorten’s announcement comes days after the speech by frontbencher Anthony Albanese in which he advocated the Labor strike a better relationship with business. The speech was seen as Albanese differentiating himself from Shorten on a number of fronts and positioning on leadership ahead of the Super Saturday byelections.

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Asked about the decision apparently not having gone to shadow cabinet, ALP sources argued it had been generally known that a Labor government would not leave in place company tax cuts above the $10 million threshold.

But shadow treasurer, Chris Bowen, asked in May how long Labor was going to wait to give certainty to middle-level companies, said for companies above $2 million turnover “it is right and proper that we take some time to carefully work that through. We will be announcing our position, which will be crystal clear, not only to the voters but to the businesses of Australia,” Bowen said.

Labor earlier committed to repealing the tax cuts for big business, now before the Senate, in the event the government manages to legislate them. There is still no indication it can do so.

Whether a Labor government could get any repeals through would depend on the attitude of the Senate of the day.

Shorten’s announcement also comes as he faces criticism over Labor’s controversial advertisement, running in the byelections, that targets Malcolm Turnbull’s personal wealth and how he would benefit from the tax cuts for large companies.

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Labor makes company tax fight all about Malcolm Turnbull’s money

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Shorten doubled down on the attack in the caucus meeting, saying that Turnbull “has no clue about how people actually live, and I do believe his wealth is connected to that”.

He also told caucus that the Longman byelection was very close and Braddon was “very difficult”.

Business size in Australia.
Australian Taxation Office, Taxation statistics 2015/16

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Labor makes company tax fight all about Malcolm Turnbull’s money

Michelle Grattan, University of Canberra

The opposition is seeking to turn the battle over company tax onto Malcolm Turnbull’s personal wealth, with an attack advertisement declaring the Prime Minister stands to profit if the cuts for big business are passed.

The advertisement, to be used this week in campaigning for the Super Saturday July 28 byelections, says Turnbull “has millions invested in funds which hold shares in dozens of big businesses that would benefit from the tax cuts.”

The inflammatory ad runs as the government is making a last ditch effort against the odds to gather Senate support for the company tax legislation, due to be voted on this week. It also comes after Labor frontbencher Anthony Albanese on Friday distanced himself from Bill Shorten’s assaults on the top end of town.

The advertisement says: “Why is former banker Malcolm Turnbull so keen to give big business a tax cut instead of properly funding our schools and hospitals? Who exactly is he looking after? Malcolm Turnbull – is he just for the top end of town?”.

Labor also issued details of Turnbull’s investments, saying his statement of interests “shows that, through at least 15 of his 39 managed funds, he invests in 18 businesses that have a turnover of more than $50 million and an additional 14 businesses that have a turnover of more than $1 billion per year. Several of these funds have a minimum investment of $1 million.”

The tax cuts for big business are directed to companies with a turnover above $50 million annually.

ReachTEL polling in the Queensland seat of Longman done last Thursday, commissioned by the progressive think tank The Australian Institute and released on Sunday, has the Labor and Liberal National Party candidates 50-50 in the two-party vote.

The ALP’s Susan Lamb is fighting to regain the seat after resigning in the citizenship crisis. Labor’s primary vote was 39.1% and the LNP was polling 34.9%. One Nation was on 14.7%.

In Mayo, the other seat polled, the Centre Alliance’s Rebekha Sharkie, who also resigned over her citizenship, is leading the Liberals’ Georgina Downer 62-38%, widening her margin from her 58-42% lead in earlier polls.

Nationally, a Fairfax Ipsos poll, published in Fairfax Media on Monday, shows Labor leading the Coalition 53%-47% on the two-party vote. Turnbull has a 51%-33% advantage over Shorten as preferred prime minister.

In Longman, only a third of voters supported cutting company tax for large businesses; in Mayo just one quarter did so.

The government has flagged it will put the legislation to the Senate this week – the last before the winter recess – even if it is headed to defeat.

Several crossbenchers are opposed to the cuts, including Pauline Hanson and the Centre Alliance senators. The government has reiterated that it won’t split the bill to have a lower threshold that would exclude the banks.

Turnbull said on Sunday that Australia’s 30% rate for larger companies was the second highest in the OECD. Only Portugal had a somewhat higher rate.

Asked whether the government would walk away from the measure if it failed to get it through this week, Turnbull said: “We are committed to this reform”.

Friday’s Albanese speech has handed ammunition to the government. The broad-ranging address was seen as Albanese positioning himself in the event of Shorten doing badly at the byelections.

On relations with business, Albanese said: “Labor doesn’t have to agree with business on issues such as company tax rates, but we do have to engage constructively with business large and small.”

Questioned on Sunday, Shorten said his office got the speech before delivery and “there was nothing in that speech which caused me any offence at all”. He and Albanese had had “an amicable chat” since the speech.

“Let me make very clear for the record my views on big business. I will work with big business – I just won’t work for big business. I’m not anti big business – I’m just pro worker, I’m pro small business, I’m pro farmer, I’m pro pensioner,” Shorten said.

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Read more:
Anthony Albanese sets out his blueprint for Labor

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“It’s just all about priorities, we just happen to believe in the fair go for working and middle class people – Mr Turnbull on the other hand, he just looks after the top end of town and his other mates.”

A nationwide poll of nearly 3000 people commissioned by the Committee for Economic Development of Australia (CEDA), published on Monday in a report “Community pulse 2018: the economic disconnect” found that a majority of people don’t feel they have benefitted personally or don’t know if they have gained from Australia’s sustained economic growth.

It also found nearly eight in ten people believe the gap between the richest and poorest Australians is not acceptable.

Releasing the results, CEDA chief executive Melinda Cilento said: “Only 5% of Australians reported having personally gained a lot from our record run of growth, while 74% felt larger corporations and senior executives have gained a lot.

“A decade of stagnant incomes and cost of living pressures in areas like health and electricity are contributing to this feeling but waning trust in business and politics are also likely factors,” Cilento said.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Who gets what? Who pays for it? How incomes, taxes and benefits work out for Australians

Public health spending is an important factor in reducing inequality between households in Australia.
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Peter Whiteford, Crawford School of Public Policy, Australian National University

The Australian Bureau of Statistics has just released its latest analysis of the effects of government benefits and taxes on household income. Overall, it shows government spending and taxes reduce income inequality by more than 40% in Australia. Disparities between the richest and poorest states are also greatly reduced.

The ABS analysis provides the most up-to-date (to 2015-16) and comprehensive figures on the impacts of government spending and taxes on income distribution. As well as direct taxes and social security benefits, it estimates the impact of “social transfers in kind” – goods and services that the government provides free or subsidises. These include government spending on education, health, housing, welfare services, and electricity concessions and rebates.

The figures also include a wide range of indirect taxes. Among these are GST, stamp duties and excises on alcohol, tobacco, fuel and gambling.

The 2015-16 results are the seventh in a series published every five to six years since 1984. The methodology is based on similar studies by the UK Office of National Statistics since the 1960s. The latest UK analysis coincidentally also came out on Wednesday.

How do the calculations work?

The ABS analyses income distribution in a number of stages.

First, it calculates the distribution of “private income”. This includes wages and salaries, self-employment, superannuation, interest, dividends and income from rental properties, among other items. It also includes net imputed rent from owner-occupied dwellings and subsidised private rentals.

Next the ABS adds social security benefits, such as the Age Pension, unemployment and family payments, to give “gross income”.

Then it deducts direct taxes – primarily income tax – to give “disposable income”.

The next stage is to add the estimated value households derive from government services. This is mainly the value of public health care and education spending.

The final stage is to deduct the estimated value of indirect taxes.

So what are the impacts on income inequality?

It is possible to calculate measures of economic inequality at different stages in this process. By implication, the difference between inequality measures is the result of the different government policies taken into account.

Figure 1 shows the Gini coefficient, which ranges between zero – where all households have exactly the same income – and 100% – where one household has all of the income. The Gini coefficient for private income in 2015-16 was 44.2. The addition of social security benefits, which mainly increase the incomes of low-income groups, reduces the coefficient by 8.1 percentage points.

Deducting income taxes – which are progressive – further reduces inequality by 4.5 points. Government non-cash benefits reduce the Gini coefficient by nearly as much as the social security system. However, indirect taxes slightly increase income inequality.

The Gini coefficient for final income is 24.9. So, compared to a coefficient of 44.2 for private income, government spending and taxes reduce overall income inequality by more than 40%.

Figure 1: Effects of government spending and taxes on income inequality, measured by Gini coefficient Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

While most of the reduction in inequality is due to government spending, taxes are obviously important to pay for this spending.

The social security system reduces income inequality (and poverty) because Australia targets benefits to the poor more than in any other high-income country.

Figure 2 shows the distribution of social security benefits and government services across income groups, from the poorest 20% to the richest 20% of households. The poorest 20% receive about seven times as much in benefits as the richest 20%. The average for OECD countries is close to one, with rich and poor receiving about the same amount.

Figure 2: Distribution of social spending ($ per week) by equivalised disposable household income quintiles, Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

Government spending on social services is also progressively distributed. This spending is considerably greater than social security spending and includes both Commonwealth and state spending on education and health.

The poorest 20% receive about 70% more in non-cash benefits than do the richest. This is not due to income-testing. Instead, it’s largely a result of the greater value of public health spending on hospitals and Medicare for older people, who tend to be in the bottom half of the income distribution.

Taxes, of course, work to reduce income inequality, as high-income groups pay a higher share than low-income groups. Figure 3 shows that the poorest 20% pay about 5% of their disposable income in direct taxes, while the richest 20% pay about 30% of their disposable income.

In contrast, indirect taxes – particularly those on tobacco and gambling – are regressive. Low-income groups pay more than high-income groups as a share of their disposable income. However, the undesirable effects of smoking and gambling on the wellbeing of low-income households need to be borne in mind.

When direct and indirect taxes are added together the overall tax system is less progressive, but the richest 20% still pay nearly twice as much of their disposable income as do the poorest 20%.

Figure 3: Distribution of direct and indirect taxes (% of disposable income) by equivalised disposable household income quintiles, Australia 2015-16.
Data source: ABS Government Benefits, Taxes and Household Income, Australia, 2015-16, Author provided

Redistribution also happens between age groups and states

In addition to reducing inequalities between income groups, government spending and taxes redistribute across age groups. Government spending is much higher for households of Age Pension age than for younger households. This is because of both the Age Pension and older households’ use of the healthcare system.

For example, households where the reference person is 75 or older receive on average just over $1,000 a week in government spending but pay about $180 a week in direct and indirect taxes. Households with a person aged 45 to 54 pay the highest taxes on average – about $800 per week – and on average receive about $620 a week in social spending.

There is also redistribution across states and territories. For example, average private income is about 65% higher in Western Australia than in Tasmania. However, on average, Western Australian households receive about two-thirds of the social security benefits that Tasmanian households get. This reduces the disparity in gross income to about 45%.

Western Australian households pay about twice as much in income taxes as Tasmanians, reducing the disparity to 35%. Households in the West receive only about 3% more in spending on social services than in Tasmania, which reduces the disparity in average incomes to 28%. West Australian households also pay about 20% more in indirect taxes than Tasmanian households (although as a percentage of disposable income, this is a higher share in Tasmania).

These figures suggest that while the financing of fairly equal social services across most parts of Australia reduces inequality between states, the income tax and social security systems also significantly reduce disparities. This is because income tax and social security are national systems and because Tasmania is the poorest state largely due to the higher share of age pensioners in its population.

Overall, this publication provides an invaluable picture of how government spending and taxes affect household economic well-being. Its results are relevant not only to the political debate about tax cuts, but also to long-term policy development to prepare Australia for an ageing population.

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

Grattan on Friday: Government celebrates on tax, fights on energy

Michelle Grattan, University of Canberra

The odds were always in the government’s favour in the battle to get its A$144 billion income tax package through parliament.

However much some Senate minnows might have objected to the package’s third stage – taking effect way out in 2024 and favouring the wealthy – they didn’t want to be blamed for denying middle and lower income earners early tax cuts.

Pauline Hanson – of course – attracted the limelight but at no point voted against stage three. But the two Centre Alliance (former Nick Xenophon Team) senators epitomised the dilemma – they voted (successfully) to amend the bill to exclude the last stage, but when the government said it was the whole package or nothing, they folded.

In response, they copped a serve from Tim Storer, the South Australian independent who was on the NXT election-ticket in 2016. Storer was the only crossbencher to hold out.

Clearly the government has had a big victory and Labor has taken a risk in saying that if elected, it will (Senate permitting!) repeal the legislation’s second and third stages, while keeping, and building on, the initial tax cuts.

What’s less clear is the size of the risk for Labor.

If the whole package had been defeated, the ALP would have been exposed as tax-cut spoilers. As it is, middle and lower income voters will know that whoever wins the election, they have a guaranteed tax cut, indeed a rather bigger one under Labor.

From Labor’s point of view, committing to repeal the second stage, which moves the threshold at which the 37% rate cuts in from $90,000 to $120,000, is more of a gamble than saying it will kill the third stage, which flattens the scale, with benefits directed to high earners.

But stage two doesn’t start until mid 2022, so a Labor government would not be taking away a bird in the hand but one that was still on the wing. Some voters might apply a discount to a cut so far in the future, even though it has been legislated.

How voters react to Labor’s position will also depend on whether the government can convincingly sell its arguments that the ALP is dissing “aspiration”, engaging in “class warfare” and, via a range of policies, is the “high tax” party.

Also, the debate over tax cuts can’t be seen in isolation. The opposition has money to use and policies still to unveil. Polls show people have other priorities – fiscal consolidation, spending in certain areas. Voters at the election will look at the full menus before them, as well as the leaders and the government’s record.

Nevertheless, the results in the July 28 byelections will be interpreted as a referendum on the competing tax plans, though other factors will feed into those contests as well. Super Saturday will reset the political landscape in one way or another.

It would have been a huge setback if the government hadn’t secured its income tax package, which was the budget’s centrepiece. Politically, there’s less at stake in its intention to put to a Senate vote next week its tax cuts for big business. On current numbers this legislation is headed for defeat.

More crucial than the fate of the company tax cuts is the government’s long struggle to nail down its national energy guarantee (NEG), with the crunch coming when Energy Minister Josh Frydenberg meets his Council of Australian Government counterparts on August 10.

The tax win has further enhanced the reputation of Senate leader and chief negotiator Mathias Cormann. The outcome of the NEG negotiation will be important for Frydenberg’s reputation.

On tax, the battle was only with the parliament. On energy, Frydenberg has to wrangle state and territory ministers (the ACT is particularly challenging), and also fend off an insurgency from Tony Abbott and other sceptics, who ran interference at this week’s Coalition parties meeting. As well, unease seems to be growing among some Nationals, including frontbencher Keith Pitt.

After an earlier general discussion in the party room, the Abbott band had wanted the NEG plan returned there before the August meeting. This isn’t happening – the next broad party room consideration is due when the legislation comes forward. But that doesn’t prevent ad hoc sorties of Tuesday’s kind.

Abbott also launched public attacks covering not just the energy issue itself but the way Malcolm Turnbull runs the party room.

“I think the government is more interested in reducing emissions than it is in cutting prices,” he told 2GB on Wednesday. And it was “a big mistake for the Coalition to sub-contract out its energy policy to the Labor state governments”.

He left open the option of crossing the floor when legislation comes. It will formalise the emissions reduction target. The critics will cavil at any provision that would facilitate a Labor government moving to a more stringent target. Yet this flexibility might be needed to secure a deal for the package.

Abbott said he hoped things wouldn’t get to the floor-crossing stage but “the executive government needs to understand that you can’t take the party room for granted”.

He complained at Turnbull’s “practice of discussing legislation at enormous length every party room meeting before we actually get to backbenchers’ questions and comments”, declaring this “completely unprecedented”.

While by necessity, “the government spends an enormous amount of time negotiating with the crossbench”, it needed to “spend a bit more time talking to the backbench,” he said.

There are obvious retorts to Abbott’s criticisms. For example, on the “sub-contracting” to the states, it is the states that have the main responsibilities in this area.

As to party processes, while he contrasted Turnbull’s style with his own and that of Howard and others, some colleagues were quick to recall his notorious “captain’s calls”, especially the paid parental leave scheme.

By late Thursday, the pro-NEG forces were mobilised, with an assortment of backbench Liberals (Julia Banks, Trent Zimmerman, Trevor Evans, Tim Wilson) and Nationals (Mark Coulton, Andrew Broad) publicly rallying to its defence.

As the Coalition celebrates on tax, the internal heat over the NEG has suddenly been turned up to high, with the disunity going on full display.

Frydenberg’s timetable means he doesn’t have to deliver on the NEG until after the byelections. But when it comes to the main election game, a credible (though inevitably disputed) energy policy is as crucial for the government as having its income tax plan in place.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.